Retiree Earning $60K Dividends On $500,000 Investment Shares Top 3 Stock Picks — 'Not Rich But Not Complaining Either'
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About three years ago, someone asked r/Retirement — a Reddit discussion board with over 90,000 members — whether it was possible to live completely off dividends in retirement years. The question sparked a lively debate and many retirees poured in with their success stories and advice.
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An investor said he was earning about $65,000 a year in dividends with an initial investment of $575,000 to $600,000 that fell to $500,000 amid a market downturn.
“This brings in 65K per year. With [Social Security] this totals 90K a year. Not rich but not complaining either.”
He had just three names in his portfolio and said he’s still able to save a lot:
“I’m over 59.5 so just federal taxes with no state income where I live. When I request a distribution I have 18% withheld for taxes. That’s more than enough to cover me for dividends but I will probably owe some for my [Social Security]. I do not have the full 65K distributed. I take as needed and am still saving more than at any other time in my life. It’s amazing how much you retain when you don’t have to have FICA and 401k withheld.”
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The investor said he was “broke” in 2013 but was able to retire just a few years down the road due to a smart decision:
“At the end of 2013 I was broke. I came into 50K from a previous employer who gave me the option of keeping my 323.00 a month pension which was was due to start in 10 years or accepting a 50K lump sum. I opted for the lump sum and invested it all in Apple. 8 years later and I’m retired.”
Let’s take a look at the holdings of the investor.
Global X Nasdaq 100 Covered Call ETF
Global X Nasdaq 100 Covered Call ETF (NASDAQ:QYLD) was one of the top holdings of the investor who collected about $60,000 per year in dividend income annually.
It is a notable ETF that earns money by selling covered call options on the Nasdaq-100 Index. The fund was started in 2013 and has since paid monthly income to investors. The fund yields about 12%. Some of the top holdings of the ETF are Apple (NYSE:AAPL), Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Broadcom (NASDAQ:AVGO).
Over the past year, QYLD is up 3%.
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Global X Russell 2000 Covered Call ETF
The investor also had the Global X Russell 2000 Covered Call ETF (NYSE:RYLD) in his portfolio. The fund generates income by selling call options on the small-cap-heavy Russell 2000 Index. Being a covered call ETF, RYLD is also not risk-free and often posts losses during down markets. The ETF is now in the limelight as analysts believe small-cap stocks will be among the top beneficiaries of an easing monetary environment.
The investor was asked how was he able to generate a high yield from his investment. He explained his two key holdings, QYLD and RYLD, in response:
“RYLD and QYLD are covered call ETFs that are based off the Russell 2000 and the NASDAQ. Their yields are in the 12% range and they pay monthly dividends. These pay my mortgage every month.”
Icahn Enterprises LP
Billionaire Carl Icahn’s conglomerate, Icahn Enterprises LP (NASDAQ:IEP), is one of the stocks in the Redditor’s portfolio. IEP has a 20% yield, but its sustainability and safety have been raising questions for quite a while now.
In November, IEP cut its dividend by 50%. The stock is down 47% over the past 12 months.
Keep in mind that the investor shared his holdings and income report three years back, when IEP’s dividends and financial situation were much better than today. Here is what the investor said about the company at the time during the discussion:
“IEP is a bit of a different animal. It is a Managed Limited Partnership and although the quarterly payments are called dividends they are actually distributions. Because it is an MLP there is a K1 form at tax time which really requires a tax pro to fill out so that is an expense. IEP pays $2 per share quarterly which is about a 15% yield.”
Today, IEP’s quarterly dividend is $0.50 a share.
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This article Retiree Earning $60K Dividends On $500,000 Investment Shares Top 3 Stock Picks — ‘Not Rich But Not Complaining Either’ originally appeared on Benzinga.com